What percentage of closing costs can a 203(b) borrower use from relatives or other entities?

In the context of the 203(b) loan program, which is part of the FHA (Federal Housing Administration) loan offerings, borrowers are allowed to receive assistance with their closing costs from relatives or other acceptable sources, such as governmental programs or nonprofit organizations. The correct percentage here is 100%, meaning that the entire amount of closing costs can be covered by gifts from family members or eligible entities.

This allowance is designed to make homeownership more accessible, particularly for first-time buyers who may have limited funds for upfront costs. The ability to use 100% of closing costs as gifts helps to reduce the financial barrier to home buying, making it easier for borrowers to secure loans without needing to produce substantial cash reserves.

Understanding this aspect of the 203(b) loan program is crucial for prospective buyers who are evaluating their financial options, as it highlights the potential for increased affordability through assistance. Knowledge of these guidelines is also important for real estate professionals who are advising clients on financing options.